Microsoft Rumored To Pay $1 Billion Plus for Nokia Deal

The latest estimate is that Microsoft plans to pay Nokia more than $1 billion for Windows phone promotional and development efforts, according to a Bloomberg story published on Monday, citing two unnamed sources said to be knowledgeable about the terms of the deal. Apparently, this part of the deal is still under negotiation, and it might not even be true as the terms have not been announced publicly. Bloomberg's sources said the agreement would last for more than five years, but it's not clear if the promo payments would recur annually or not.

The sources also told Bloomberg that Microsoft agreed to pay more than $1 billion for this part of the deal to ensure that Nokia would not select Google's Android operating system instead of the Windows Phone 7 OS.

A comment made by Nokia CEO Stephen Elop at the time of the deal's announcement -- that the deal would generate "billions" in value for Nokia -- had been interpreted as a direct payment by some when the deal was first announced. Later press accounts debunked this idea. An Engadget story cited Elop as indicating that there would be no cash transfer to initiate the deal. It appears that much of the revenue exchange for both companies will come from leveraging each others' intellectual property for use in Nokia's Windows phone and paying the associated royalty fees.

Nokia's Windows phone is currently under development and Microsoft expects the devices to see the light of day in a volume release sometime in 2012, according to Andy Lees, president of Microsoft's Mobile Communications Business unit. Microsoft is planning a major update release for Windows Phone 7 phones in the second half of this year. That update will add Internet Explorer 9, access to Windows Live SkyDrive and integration with Twitter.